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CORPORATIONS AS SOCIAL CHANGE AGENTS: INDIVIDUAL, INTERPERSONAL, INSTITUTIONAL, AND ENVIRONMENTAL DYNAMICS

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INTRODUCTION TO SPECIAL TOPIC FORUM

CORPORATIONS AS SOCIAL CHANGE

AGENTS: INDIVIDUAL, INTERPERSONAL,

INSTITUTIONAL, AND ENVIRONMENTAL

DYNAMICS

ROBERT J. BIES Georgetown University JEAN M. BARTUNEK Boston College TIMOTHY L. FORT George Washington University

MAYER N. ZALD University of Michigan

Over the past two decades, there have been a growing number of corporations, both within and beyond the United States, engaging in activities that promote positive social change. The papers in this special topic forum examine corporate social change agency at the micro, meso, and macro levels of analysis. Through these analyses, the authors of these papers build a richly textured, multidisciplinary conceptual founda-tion for analysis and research on corporate social change activities.

Over the past two decades, a growing number of corporations, both within and beyond the United States, have been engaging in activities that promote positive social change. Positive so-cial change activities refer to initiatives to im-prove the well-being of communities on local and global levels in such areas as health, race relations, the environment, or economic devel-opment. Examples of such corporate activities include

• the initiatives of Ford Motor Company of

South Africa to proactively fight HIV/AIDS;

• United Parcel Service and its Welfare to

Work programs, part of a partnership with various government, social service, commu-nity, and nonprofit organizations;

• BankBoston’s Community Banking Group

and its economic development efforts tar-geted at entire communities of moderate in-come and inner city markets;

• Levi Strauss & Co. and its Project Change anti-racism initiative;

• initiatives to support sustainable develop-ment by such corporations as McDonald’s and Bank of America, in partnership with

The Natural Step, a Stockholm-based envi-ronmental organization; and

• Green Mountain Coffee’s fostering of fair

trade coffee around the world.

That corporations do sometimes act as social change agents is not in dispute; indeed, it is an empirical reality around the world. Moreover, it is becoming a political reality as well. For ex-ample, the United Nation’s Global Compact (http://www.unglobalcompact.org/index.html), launched in 1999, involves hundreds of corpora-tions from all regions of the world who are work-ing to advance ten principles that address human rights, labor, the environment, and anti-corruptionpolicies.

The Global Compact also includes an Aca-demic Network, established in 2005, with the aim of creating a loose association that can de-fine the role of academic institutions within the Global Compact, as well as making possible the participation of greater numbers of academics and academic institutions. Through this aca-demic involvement and research, the goal is to increase knowledge and understanding of

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porate citizenship in shaping present and future global business leaders.

The interest of the Academy of Management in these issues is evident. During October 2006, the Academy of Management cosponsored a conference on Business As an Agent of World Benefit with the Global Compact and the Weatherhead School of Management at Case Western Reserve University.

Activity associated with corporate social change leadership raises important intellectual questions that are worthy of scholarly analysis and research. One basic question is “Should corporations act as corporate social change agents for the betterment of their larger society, and, if so, why?” This question has been ad-dressed for some time by scholars in the field of business ethics, in moral terms. In many cases the business ethics focus has been on whether corporations should act as social change agents, regardless of the specific economic con-sequences (Donaldson, 1982; Donaldson & Dun-fee, 2000; Fort, 2001; Fort & Schipani, 2004; Solo-mon, 1993; Werhane, 1985).

The question has also been addressed by some management scholars. For example, Hin-ings and Greenwood (2002), in a special forum in Administrative Science Quarterly, argue that it is crucial for corporations to recognize their place in and contribute to their larger societies. However, they also argue that, since the study of corporations has moved away from sociology departments to business schools, issues of the responsibility of the corporation in relation to its larger society largely have been abandoned. If this question is addressed, it is typically ad-dressed in terms of whether a “business case” can be made for it.

Whether a business case can be made for social change agency—that is, whether corpora-tions should act as agents of social change on the basis of economic imperatives or at least without undermining their competitiveness—is an important question. This question has both normative and descriptive dimensions.

Most authors, such as Hinings and Green-wood (2002) and Margolis and Walsh (2003), are clear that corporations should act as social change agents. According to Margolis and Walsh’s empirical study, the evidence for the business case is mixed thus far. However, Orlitzky, Schmidt, and Rynes (2003), in an ex-haustive and rigorous meta-analysis of the

re-lationships among social responsibility, envi-ronmental responsibility, and corporate financial performance, found that, on the whole, social responsibility and, to a lesser extent, en-vironmental responsibility tend to be associated with better corporate financial performance. There is, therefore, some evidence that corpo-rate social change agency can be “good for busi-ness.” However, it is crucial to go beyond this question and to explore some of the dynamics associated with social change agency. That is exactly what we invited authors of papers in this special topic forum to do.

The goals of this STF were twofold: (1) to en-courage scholarly interest in the growing orga-nizational phenomenon of corporate social change activities and (2) to build a richly tex-tured, multidisciplinary conceptual foundation for analysis and research on corporate social change activities. Such an understanding in-volves examination of corporate social change agency at multiple levels: the micro level (focus-ing on psychological and social psychological bases), the meso level (involving relational and network issues), and the macro level (involving political, economic, institutional, and societal dynamics). The papers presented in this STF have broken new ground in terms of constructs and conceptual clarity that will guide future re-search in addressing this question.

ANALYZING THE BUSINESS CASE FOR CORPORATE SOCIAL CHANGE ACTIVITIES

Breaking new conceptual ground, two papers in this STF address the business case question. Michael Barnett, in “Stakeholder Influence Ca-pacity and the Variability of Financial Returns to Corporate Social Responsibility,” argues that the business case for social change activities must recognize the path-dependent nature of firm-stakeholder relations, and he introduces a new construct—stakeholder influence capaci-ty—as key to understanding the effects of corpo-rate social responsibility on corpocorpo-rate financial responsibility. This new construct focuses on the ability of a firm to capitalize on opportunities to improve stakeholder relationships through cor-porate social responsibility. In his analysis Bar-nett demonstrates how stakeholder influence capacity can explain how corporate social re-sponsibility is transformed into corporate finan-cial performance.

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Shedding further insight into the business case for corporate social change activities is Alison Mackey, Tyson Mackey, and Jay Barney’s “Corporate Social Responsibility and Firm Per-formance: Investor Preferences and Corporate Strategies.” Mackey et al. propose a model that analyzes how the supply and demand for so-cially responsible investment opportunities de-termine whether these activities will or will not have an impact on a firm’s market value. One of the insights of this model is its explanation of why firms might fund socially responsible in-vestments that do not maximize the present value of future cash flows because they enhance the market value of the firm.

MULTILEVEL AND MULTIDISCIPLINARY EXPLANATIONS OF CORPORATE SOCIAL

CHANGE ACTIVITIES

The remaining papers begin their analysis by accepting the empirical reality that corporations do act as social change agents. But the core questions driving these analyses is what indi-vidual, interpersonal, institutional, and environ-mental dynamics shape these social change ac-tivities and how corporations’ relationships with their larger environment depend on these dy-namics. What makes these papers so rich and textured in their analysis is the authors’ multi-level and multidisciplinary approaches.

Ruth Aguilera, Deborah Rupp, Cynthia Wil-liams, and Jyoti Ganapathi, in “Putting the S Back in Corporate Social Responsibility: A Mul-tilevel Theory of Social Change in Organiza-tions,” integrate theories of microlevel organiza-tional justice, mesolevel corporate governance, and macrolevel varieties of capitalism. With this multilevel perspective, they focus on how the motives of actors (instrumental, relational, and moral) shape action at four levels of analy-sis (individual, organizational, national, and transnational) and on how the interaction of the motives across levels facilitates and impedes social change activities.

Shelley Brickson also uses multilevel analy-ses in “Organizational Identity Orientation: The Genesis of the Role of the Firm and Distinct Forms of Social Value,” which lays out a basis for a descriptive stakeholder theory. Central to Brickson’s analysis is organizational identity orientation, which she defines as the perception of the assumed relations between an

organiza-tion and its stakeholders. Brickson argues that identity processes lie at the heart of how firms perceive their roles, determining how organiza-tions relate to their stakeholders. Three different orientations—individualistic, relational, and collectivist—shape different patterns of rela-tions with internal and external stakeholders, as well as distinct possibilities for creating social value both external and internal to the organi-zation.

Andrew King, in “Cooperation Between Cor-porations and Environmental Groups: A Trans-action Cost Perspective,” uses the transTrans-action cost perspective as his central analytical ap-proach to these issues. He proposes that if trans-action costs are low, then corporations can min-imize social costs by transacting to their mutual advantage; however, when transaction costs are high, then corporations reduce social costs, re-quiring the intervention of a centralized institu-tion. But King goes beyond this proposition to explore the situation where transaction costs exist but the intervention of hierarchical institu-tions is not allowed. Using transaction cost analysis, King advances propositions to explain how collaboration between corporations and en-vironmental stakeholder groups will be struc-tured in such a situation.

A large number of the papers in this special issue, even some in which the authors take a multidisciplinary approach, rely to a consider-able extent on institutional theory. In doing so, they contribute to the growing awareness of means of institutional change.

Frank den Hond and Frank de Bakker, in “Ideologically Motivated Activism: How Activist Groups Influence Corporate Social Change Ac-tivities,” also rely on a multidisciplinary foun-dation to gain insight into corporate social change activities. Building on the social move-ment literature and institutional theory, they present a theoretical framework that provides a textured analysis of activism and institutional change. Making a key distinction between refor-mative activist groups and radical activist groups, they advance a series of propositions on how those two types of activist groups engage in different arguments and tactics, depending on whether they are striving for the deinstitutional-ization of a field frame and the reinstitutional-ization of their preferred field frame or are trying to achieve field-level change.

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Using the institutional theory lens, Christo-pher Marquis, Mary Ann Glynn, and Gerald Davis, in “Community Isomorphism and Corpo-rate Social Action,” focus on how institutional pressures at the community level shape corpo-rate social action within the metropolitan areas where corporations are headquartered. Marquis et al. analyze corporate social action in terms of its nature, or the focus or target of corporate efforts (e.g., arts, education, or health services), theformthat corporate social action takes (e.g., cash, in-kind donations, volunteerism), and the level(or amount) of corporate social action. With an explicit focus on the community as the unit of analysis, they propose that isomorphism legiti-mates, which is why there is so much similarity within a community or geographic region.

John Campbell, in “Why Would Corporations Behave in Socially Responsible Ways? An Insti-tutional Theory of Corporate Social Responsibil-ity,” also takes an institutional theory perspec-tive in his analysis. For Campbell, the focus is on how economic conditions influence the de-gree of corporate social responsibility. In partic-ular, he focuses on a variety of institutional con-ditions that mediate economic concon-ditions and corporate social responsibility (e.g., public and private regulation, the presence of nongovern-mental and other independent organizations that monitor corporate behavior, and organized dialogues among corporations and their stake-holders).

Finally, the institutional theory perspective also guides the analysis in Ann Terlaak’s “Or-der Without Law? The Role of Certified Manage-ment Standards in Shaping Socially Desired Firm Behaviors.” Terlaak focuses on certified management standards (CMS) and how they shape corporate social responsiveness and cor-porate social responsibility. In particular, Ter-laak highlights two unique attributes of CMS— codification and certification—and how those attributes make CMS different from social norms in shaping socially desired firm behav-iors.

THE THEMES OF THE STF

These papers suggest several important themes. First, while our focus in the call for papers for this STF was on corporations as so-cial change agents, only den Hond and de Bak-ker’s paper emphasizes corporate social

activ-ism, analyzing how corporate activism differs depending on its focus. Most of the papers ad-dress factors that affect whether firms will un-dertake socially responsible action. In other words, very little is said in this STF about cor-porate leadership or entrepreneurship with re-spect to social action. Is this because there is so little of it, or is this because the current theories that most guide work like this, such as institu-tional theory, do not primarily focus on action and leadership?

Second, the papers indicate several important factors pertinent to the business case for corpo-rate social agency. Rather than simply accept or challenge the relationship between corporate social responsibility and financial performance, the authors consider several factors that play a role in this relationship, such as firms’ stake-holder influence capacity (Barnett), the supply and demand of socially responsible investment opportunities (Mackey et al.), and transaction costs (King).

Third, the papers indicate that relationships between organizations and their wider environ-ment are multilayered. Aguilera et al. suggest ways that motives of actors affect their actions across multiple levels, from individual to transnational. Brickson indicates how individu-alist, relational, and collectivist identity pro-cesses in organizations affect patterns of rela-tionships with both internal and external stakeholders. In other words, it is much too sim-ple to speak of “the organization” and “its envi-ronment.”

Fourth, the emphasis of several of the papers is on how institutional forces affect corporate social responsibility. These may include pres-sures at the community level (Marquis et al.), economic conditions (Campbell), or external standards such as CMS (Terlaak).

THE IMPORTANCE OF FURTHER INQUIRY All of these themes and their expression in the papers in this STF stimulate further inquiry. The material presented in the papers is all empiri-cally testable. In addition, the papers suggest the importance of exploring issues of corporate agency in more depth. To what extent do corpo-rations act proactively with respect to corporate social action or responsibility? How much are they true leaders in this regard, and how much are their actions responses to institutional

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pres-sures that come from external sources, whether the sources be the economy, the neighboring community, or bodies that set regulatory stan-dards? How multilayered and complex are orga-nizations’ relationships with their external stakeholders, and how do the multiple layers play a role in corporate social responsibility? And, if corporate social responsibility affects or does not affect financial performance, how much is that because of transaction costs, firms’ stakeholder influence capacity, and the supply and demand of socially responsible investment opportunities?

As evidenced by these articles, the phenome-non of corporations as social change agents is a rich and fertile area for scholarly research. Be-yond this special issue, additional issues for future inquiry include

• issue selling and the emergence of

corpo-rate social change activities;

• the role of leadership—formal and

infor-mal—in the emergence of social change ac-tivities;

• the relationship of corporate culture, corpo-rate values, and social change activities;

• corporate social change activities as a stra-tegic imperative;

• the role of organizational characteristics— formal structure and demographic—in the emergence of social change activities;

• alternative organizational forms and

ar-rangements associated with corporate so-cial change activities; and

• an assessment of the effectiveness of corpo-rate social change activities.

CONCLUSION

These papers are not only a call to research-ers to broaden the scope of their inquiry but are also a call to scholars to question the very

foun-dation of many of their assumptions about the role and function of corporations in the twenty-first century and how they impact lives around the world. In other words, these papers are a call to intellectual action, especially to interdiscipli-nary scholarship and to the recognition of the complexity and importance of issues associated with corporate social action. The papers demon-strate that there are multiple sources of schol-arly insights for notions of corporate responsi-bility. Empirical, legal, and philosophical insights are frequently left as separate fields of inquiry. Yet the papers open doors to multidis-ciplinary engagement and synthesis.

REFERENCES

Donaldson, T. 1982.Corporations and morality.Englewood Cliffs, NJ: Prentice-Hall.

Donaldson, T., & Dunfee, T. 2000.Ties that bind: A social contracts approach to business ethics.Cambridge, MA: Harvard Business School Press.

Fort, T. 2001.Ethics and governance: Business as mediating institution.Oxford: Oxford University Press.

Fort, T., & Schipani, C. 2004.The role of business in fostering peaceful societies. Cambridge: Cambridge University Press.

Hinings, C. R., & Greenwood, R. 2002. Disconnects and con-sequences in organization theory? Administrative Sci-ence Quarterly,47: 411– 421.

Margolis, J. D., & Walsh, J. P. 2003. Misery loves companies: Rethinking social initiatives by business. Administra-tive Science Quarterly,48: 268 –305.

Orlitzky, M., Schmidt, F. L., & Rynes, S. L. 2003. Corporate social and financial performance: A meta-analysis. Or-ganization Studies,24: 403– 441.

Solomon, R. C. 1993.Ethics and excellence: Cooperation and integrity in business.Oxford: Oxford University Press. Werhane, P. H. 1985.Persons, rights, and corporations.

Engle-wood Cliffs, NJ: Prentice-Hall.

Robert J. Bies(biesr@georgetown.edu) is a professor of management and academic director of the Executive Master’s in Leadership Program in the McDonough School of Business, Georgetown University. He received his Ph.D. in organizational behavior from Stanford University. His research focuses on leadership and the delivery of bad news, revenge in the workplace, and organizational justice.

Jean M. Bartunek(bartunek@bc.edu) is the Robert A. and Evelyn J. Ferris Chair and Professor of Organization Studies in the Carroll School of Management at Boston College and a past president of the Academy of Management. She received her Ph.D. in social and organizational psychology from the University of Illinois at Chicago. Her research focuses on intersections of organizational change, social cognition, and conflict.

Timothy L. Fort(timfort@gwu.edu) is the Lindner-Gambal Professor of Business Ethics in Strategic Management and Public Policy at George Washington University. His Ph.D. and J.D. are both from Northwestern University. His research focuses on how

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ethical business behavior can contribute to the reduction of violence in the world, optimal organizational structures to foster affective ethical sentiments in business, the role of religion in business ethics, and the commercialization of science and technology.

Mayer N. Zald (mayerz@umich.edu) is a professor of sociology, social work, and business administration (emeritus) at the University of Michigan, where he received his Ph.D. in sociology. His research interests include social movement theory, orga-nizational theory, the sociology of social welfare, political sociology, and sociology as a humanities-based science.

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